What is a 1031 Exchange and How Does it Work?
A 1031 exchange is a tax-deferral tool that real estate investors can use to build wealth, save on taxes, and expand their portfolio. This strategy is applicable to any investor who wants to sell an existing property, and trade up for higher cash flow.
1. Decision to Sell
Exchanger decides to sell their investment Property and notifies a Qualified Intermediary (QI).
2. Sell Property
Sell relinquished property and transfer all proceeds of the sale to QI. Look for replacements.
3. Find Replacement
Exchanger identifies the replacement priorities within 45 days of the sale and notifies QI.
4. Buy Replacement
Working with QI, must buy replacements within 180 days of sale. Funds are transferred to seller.
1031 Exchange Benefits
DEFERRAL OF TAXES
Exchanging one property for another allows the taxpayer to defer the capital gains taxes on the sale.
CONSOLIDATION
If you want to streamline your portfolio, you can sell off smaller properties, pool that equity, and use it for a larger acquisition.
LONG-TERM STRATEGY
1031 exchanges can be repeated over and over again, resulting in deferring taxes indefinitely and accumulating welath and assets.
MANAGEMENT RELIEF
Grow profits and reduce stress by trading a high maintenance property for a less intensive apartment/NNN investment.
MAXIMIZE CASH FLOW
Trade investment property for a replacement property with greater income potential and return on investment.
PURCHASING POWER
With more money for investment, you have increased purchasing power on future transactions as well as extra leverage to acquire.
ESTATE PLANNING
Investors looking to pass assets on to their heirs can exchange for multiple investments, allowing for equal share.
PASSIVE INCOME
1031 properties assure a steady flow of income and provides the opportunity to benefit from this passive income for years.
DIVERSIFICATION
Replace a property for a pool of investment properties with options to relocate into new areas or to buy different types of property.
CAPITAL PRESERVATION
Deferring capital gain/depriciation recapture taxes essentially equals an interest-free, no-term loan on taxes until property is sold for cash.
BUSINESS EXIT STRATEGY
When exchanging business real estate you can buy property that will eventually be your retirement home, 2nd residence, or create cash flow.
MOVING MARKETS
Upon relocation, exchange allows you to defer the gain as well as the depreciation recapture so all your equity stays invested in real estate.
How Magnify Can Help
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Guide a successful 1031 exchange that is properly structured and set up for high reward
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Craft the best personalized investment plan combining your goals and our expertise
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Find new exclusive, high-performing investment properties ideal for exchanges
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Expertly navigate the ins-and-outs of the tax law following all restrictions and protocol
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Run all matters by a 1031 Exchange Attorney to avoid any legal discrepancies
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Identify and follow each state’s unique laws utilizing our company’s national resources
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Build a diversified portfolio of high-ROI properties with increased cash flow
Interested in learning more?
Contact us below to connect with a Magnify agent and
strategize on if a 1031 exchange is right for you.
